State Budget: Allan government pegged to slash millions from Victorian tourism sector

Victoria’s tourism sector is bracing for tens of millions of dollars to be ripped from the budget as the Allan government tries to curb the state’s soaring debt levels, with the Premier saying the impact of cost-of-living pressures “can’t be ignored”.

Victoria’s tourism sector is under threat with the Allan government expected to slash funding in Tuesday’s state budget.

The Sunday Herald Sun can reveal tourism bodies are bracing for tens of millions of dollars to be ripped from the budget as Treasurer Tim Pallas wields the axe in an effort to rein in spending and curb the state’s soaring debt levels.

But on Sunday, Premier Jacinta Allan would not be drawn on the nature of any cuts to the sector, reiterating that Mr Pallas would hand down the budget on Tuesday.

However, she said the state government would continue to “support” and “invest” in the industry.

“The tourism industry, the visitor economy industry, has been and will continue to be a really important part of our economy here in Victoria,” she said.

When questioned about the funding cuts, Ms Allan said the budget must “address” the pressures facing Victorians amid a cost-of-living crisis.

Premier Jacinta Allan says the state government would continue to ‘support’ the tourism sector. Picture: NCA NewsWire

“We can’t ignore the pressures of the pandemic, the global pressures, the interest rate-rise pressures, the inflationary pressures, we can’t ignore the impact that those are having on households and businesses,” she said.

“That is why in ... framing Tuesday’s budget, we are firmly focused on those pressures for households and businesses.”

She added: “We can’t ignore those pressures. We can’t wish them away. We need to address them. We need to work through these challenges with a focus on understanding the cost pressures that households in Victoria are facing.”

But when pressed by reporters, the Premier would not confirm whether she was flagging cost-of-living relief.

“The budget will be handed down on Tuesday,” she said.

Her comments come after the Sunday Herald Sun revealed that tourism industry insiders said Visit Victoria, the agency tasked with promoting the state, was facing significant cuts, while regional tourism bodies had been told campaigns and advertising all face the axe.

Informal budget briefings warned tourism bosses to reconsider future spending and not enter into any new contracts.

“Any activity not already formally contracted will likely not proceed,” one senior source said.

“Existing contracts will be honoured, but nothing else will be going ahead and nothing new will be commenced.

“We are expecting a shit sandwich.”

Experts warn Victoria’s visitor economy would take a hit without significant state government investment. Picture: Michael Kai

The feared mass funding cuts could threaten thousands of jobs and the viability of some of the state’s 96,000 tourism businesses, they said.

Tourism minister Steve Dimopoulos told a parliamentary inquiry last year those businesses were heavily reliant on state government funding.

Visit Victoria’s budget last year was an estimated $55m, made up of $32.5m in destinational marketing and a further $20m in operating costs.

“There are 96,000 tourism businesses in Victoria which rely on that investment. In fact 15 per cent of all businesses in this state are tourism businesses,” Mr Dimopoulos said last year.

“They are mainly small businesses with less than 20 staff who cannot really do the same level of work. They do not have $32.5 million in destination marketing.

“They rely on word of mouth. They rely on our funding pool but also our relationship with Tourism Australia.”

Latest data shows tourism spending in Victoria has hit a record high with visitors pouring an unprecedented $37.8bn into the state economy in 2023 – $5.4bn higher than pre-pandemic levels.

While Melbourne was the most popular destination for interstate visitors, Victoria sits in third place for total tourism spend in the country after Queensland and NSW.

Tourism executives have warned Victoria is unlikely to improve on that position without significant investment from the Victorian Government.

Victoria’s tourism recovery is lagging behind New South Wales and Queensland. Picture: Josie Hayden

Tourism Research Australia has forecast Victoria’s visitor economy has the potential to grow a further $16 billion to $53 billion by 2028.

However, that would rely on significant investment to grow demand from interstate visitors.

Opposition tourism spokesman, Sam Groth, warned against cutting tourism funding.

“With Victoria’s tourism recovery lagging severely behind that of NSW and QLD, cuts to funding for our tourism bodies are not the answer,” he said.

“Labor cannot manage money and by desperately cutting funds to an industry that is a key driver of local jobs and economic opportunity, Victoria will only fall further behind other states.”

Refusing to comment on Tuesday’s budget, a government spokesman on Saturday said a raft of current initiatives were building on investments in Victoria’s visitor economy.

“We know our tourism operators are the lifeblood of so many communities across Victoria,” she said.

“That’s why we’re investing in experiences, attractions, industries and partnerships that make Victoria a tourism drawcard.

“Our strong investment in Victoria’s visitor economy and blockbuster major events has generated a new record high of $37.8 billion in tourism spending in Victoria in 2023 – $5.4 billion higher than 2019 levels.”

Major credit agencies have warned Victoria faces further rating downgrades unless it was able to show it could curb spending and improve the state’s bottom line.

S & P Global Ratings analyst Anthony Walker said he expected the state’s overall debt position to continue to rise on the back of the government’s infrastructure program.

Mr Walker said pressure on the state’s credit rating could also rise if blowouts continue on the North East Link, West Gate Tunnel and Suburban Rail Loop.

“Pressure on the rating will intensify if the government can’t outline a creditable strategy to return the budget to a cash operating surplus and narrow its fiscal cash deficit, which includes infrastructure spending,” he said.

“Victoria’s credit quality is underpinned by its wealthy economy and strong national institutional standards on a global scale.”

Originally published as State Budget: Allan government pegged to slash millions from Victorian tourism sector